Abstract

S and L Enterprises is a company located at 67 Antoinette St., Parkway Village, Brgy. Apolonio Samsom, Quezon City, Philippines, which is an importer, wholesaler and retailer of fiberglass components. Its major product lines include resin, stryrene and fiber mats. They also have a wide range of solvents, finishing materials and other fiberglass auxiliaries. Also, S and L Enterprises is into manufacturing products like filter boxes, bath tubs, boats, pigeon perches and other products made to order by their customers. Like any other business, S and L Enterprises aims to achieve the greatest possible satisfaction of customers as well as the maximum revenue that they can acquire. In this study, only the production process of manufacturing pigeon perch will be discussed in detail. Every pigeon perch undergoes seven main processes. These are preparation of fiberglass and flat sheet, cutting, assembly, finishing, quality checking, and lastly cleaning and packing.

This study has been conducted to help achieve the companys maximum revenue through generating a production schedule for pigeon perches. In doing this, the demand and the number of units to be produced must be met with the minimum production and holding costs. In determining the number of units to be produced, Deterministic Dynamic Programming will be applied, specifically Inventory Approach.

1.0 Introduction

1.1 Company Profile

S and L Enterprises Co. is a company which is an importer, wholesaler and retailer of fiberglass components. Their major product lines include resin, styrene and fiber mats. They also have a wide range of solvents, finishing materials and other fiberglass auxiliaries.

The company supply to major FRP industries such as bus, water tanks, fishing boats, religious artifacts, synthetic marbles and kiddie rides. They have their local dealers to cater the provincial requirements.

They maintain good relationship with clients and sometimes serve as major consultants to them for their product development. They also provide technical solution for their problems and suggest standards for quality output.

After more than 12 years of experience in the industry, the company provide their clients with resins which are specially formulated for their needs. They also handle their own product development, testing, formulations and applications with technologies coming from Japan, Singapore, China, and Philippines.

The company's vision is to have continuous development, technical exchange of knowledge, and to work side-by-side with their clients by providing their specific needs in terms of time, cost and quality. . 1.2 Objectives of the Study

The study generally aims to provide an overview of the company, as well as efficient recommendations to solve the company problems using methods and techniques learned in Operations Research.

The specific objectives are as follows:

1) to apply the principles of Operations Research in real-world problems and models 2) to analyze the current operations of the company and look for areas of improvement

3) to use the deterministic dynamic programming approach in solving the problem presented 4) to minimize the companys cost by presenting recommendations that would optimize the use of the companys storage capacity

1.3 Background of the Study Scarcity of resources is almost certain ever since the concept of profitability was established. Maximizing proceeds has become the goal from that point on. To increase the yield of revenues, it is necessary to utilize these scarce resources. Sound decision-making is pertinent to achieve this goal. The focus of this study, which is operations research, can help arrive at an optimal or near optimal solutions to various problems of the whole operation system of every business. Operations research is typically concerned with determining the maxima (of profit, assembly line performance, crop yield, etc.) or minima (of loss, risk, etc.) of some objective function. It facilitates management to achieve its goals using scientific methods. Operations research (OR) is a tool for decision-making adopted since World War II. The Operations Research Society of the Philippines defined OR as the discipline of applying advance analytical methods to help make better decisions at both strategic as well as day-to-day operational levels. Operations research is an interdisciplinary science, which deploys scientific methods such as mathematical modeling, statistics, and algorithms to decision making in complex real-world problems, which are concerned with coordination and execution of the operations within an organization. Its primary tools are mathematical programming, statistics, queuing theory, scholastics, game theory, and simulation. Deterministic Dynamic Programming, which is used in this study, is an application of OR which determines the optimum solution to an n-variable problem by decomposing it into n stages with each stage constituting a single-variable sub problem. The study aims to use Deterministic Dynamic Programming to determine the optimum number of units of pigeon perch to be produced.

1.4 Scope and Limitations

The company has several product lines. The study will focus on the optimization of the production and storage system of pigeon perch. The study specifically will focus on the optimizing on storing fiber mat, a vital component on manufacturing pigeon perch. The cost of fiber mat varies from time to time.

The cost of raw materials such as resin, styrene, hardener, labor cost were assumed constant so as to focus on the effect of the storage cost. Data from the company were obtained such as cost, supply and the monthly demand of the products. The cost data includes raw materials cost, production cost, setup cost and electric bill. Data that were gathered is from November 2010 to August 2011. 1.5 Problem Background

One of the products of S and L Enterprise Corp is pigeon perch. However, they are currently experiencing shortage in supply of raw materials. Thus, they do not always meet the demand during these months. This is because they do not increase production during peak seasons and are not able to fully utilize their storage capacity.

2.0 Problem Description

2.1 Statement of the Problem

This study will focus on minimizing cost while optimizing the production and storage capacity. That is, the study will determine the optimum production system that would utilize the surplus of raw materials and produce enough during peak seasons, so that the company will be able to meet their demands throughout the year, even during off seasons. 2.2 Methodology

2.2.1 Materials The materials that were used by the researchers in the conduct of the study are the following: Pen Paper Calculator Laptop

2.2.2 Method

The study began with a tour in the company. All the processes, machines, materials were showed, discussed and explained. Observation has been made to get familiarized to the processes from raw materials up to the finish product.

Interviews on the processes in the fabrication site were conducted with the workers and Administrator Head. Observation on actual operations on the production system was done in able to identify problems. Actual line work was done on some processes of the production system in able to experience firsthand the operations in the fabrication site. Data were gathered such as historical data of the production of the company.

Problem was identified analysing the data given by the company. IE tools were applied to come up with a solution. Deterministic dynamic programming was used in determining optimum amount of products to be produced per month and the amount to

be stored in the warehouse. Also, sensitivity analysis was made in order know the increase in cost that would be incurred if the cost of supply was increased.

After doing the analysis part, recommendations were made to solve the problem.

3.0 Model Formulation

Dynamic Programming was used in able to determine the optimum values in the production of pigeon perch. The study aims to maximize the storage capacity of the company.

Cost Data Table Fiber mat storage Production cost Setup cost 4php/kg monthly basis 51900/month

*production cost - includes labor, also depends the demand quantity to be manufactured *setup cost includes water bill cost, electricity bill cost

Warehouse capacity for Fiber Mat data table Storage Capacity Average supply of Fiber mat per month Ratio of Fiber mat to finished product(in kg) 2 tons (2000 Kg) 50 tons (50 000) 20kg:4kg

Demand of fiber mat table Month November December January February March April May June July Demand (tons) 9.96 10.37 10.22 9.91 9.73 10.24 9.960 9.977 10.059

Monthly cost in manufacturing of pigeon perch Month November December January February March April May June July Production Cost 185000 175000 175000 179342.4658 200000 220000 200000 206666.6667 208888.8889 Inventory Cost 8, 000 8, 000 8, 000 8, 000 8, 000 8, 000 8, 000 8, 000 8, 000 Setup Cost 51, 900 51, 900 51, 900 51, 900 51, 900 51, 900 51, 900 51, 900 51, 900

*production cost- includes purchasing cost of materials *setup cost- electricity, water cost consumption

Recursive Equation

Cost = (P)(x) + (IC)(i) + S + ft+1 Legend Symbol I X IC P S Meaning Inventory from last month Number to be produced for the month Inventory Cost Production Cost Set-Up Cost

4.0 Results and Discussion

From the recursive equation, we solved the cost incurred by S and L Corp by adding Variable Purchase Cost, Variable Inventory Cost and the Fixed Set-Up Cost, setting the Months as Stages and the given demands per month as States. Using Deterministic Dynamic Programming using Backward Approach (refer to Appendices), we set the Month of July as Stage 9 and the preceding months are decremented by one until the month of November as Stage 1. By following the recursive equation per stage, we arrived at a final result of the amount to produce per month; assuming that on the month of October there is an available of 5 tons stored, for the month of November they should produce 9.96 tons with 5 tons in the inventory; for December produce 10.37 tons with 5 tons in the inventory; for January produce 10.22 tons with 5 tons in the inventory; for February produce 9.91 tons with 5 tons in the inventory; for March produce 9.73 tons with 5 tons in the inventory; for April produce 8.27 tons with 5 tons in the inventory; for May produce 8.96 tons with 3 tons in the inventory; for June produce 8.9766 tons with 2 tons in the inventory; and in July produce 9.0588 tons with 1 ton in the inventory.

Optimum Solution for the Original Data Month September November December January February March April May June July Allot 5 tons for inventory Produce 9.96 tons (with 5 tons in inventory) Produce 10.37 tons (with 5 tons in inventory) Produce 10.22 tons (with 5 tons in inventory) Produce 9.91 tons (with 5 tons in inventory) Produce 9.73 tons (with 5 tons in inventory) Produce 8.27 tons (with 5 tons in inventory) Produce 8.96 tons (with 3 tons in inventory) Produce 8.9766 tons (with 2 tons in inventory) Produce 9.0588 tons (with 1 ton in inventory)

Therefore, Total Cost = P 16,899,080.50

5.0 Conclusion

Conclusion

6.0 Recommendation

Recommendation

References: Taha, H. A. 2003. Operations Research: An Introduction. 7th ed. Pearson Education, Inc. New Jersey. Winston, W. L. 2004. Operations Research: Applications and Algorithms. 4th ed. Brooks / Cole. California.

Appendices

Appendix 1 Deterministic Dynamic Programming

The following is the solution for the optimum amount of product to be produced per month and amount of product to be stored in the warehouse. Deterministic Dynamic Programming
Stage 9 i 5 4 3 2 1 Stage 8 2 3 3 4 4 4 5 5 5 5 Stage 7 3 4 8.96 8.96 200,000.00 200,000.00 1792000 1792000 8000 8000 24000 32000 51900 51900 1867900 1875900 5,743,146.67 5,558,257.78 5,743,146.67 5,551,146.67 8.9766 8.9766 7.9766 8.9766 7.9766 6.9766 8.9766 7.9766 6.9766 5.9766 206,666.67 206,666.67 206,666.67 206,666.67 206,666.67 206,666.67 206,666.67 206,666.67 206,666.67 206,666.67 1855164 1855164 1648497.333 1855164 1648497.333 1441830.667 1855164 1648497.333 1441830.667 1235164 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 16000 24000 24000 32000 32000 32000 40000 40000 40000 40000 51900 51900 51900 51900 51900 51900 51900 51900 51900 51900 X 5.0588 6.0588 7.0588 8.0588 9.0588 cost 208,888.89 208,888.89 208,888.89 208,888.89 208,888.89 Cost(x) PrC 1056727.111 1265616 1474504.889 1683393.778 1892282.667 inventory cost 8000 8000 8000 8000 8000 Cost(i) IC 40000 32000 24000 16000 8000 SeC 51900 51900 51900 51900 51900 Total 1923064 1931064 1724397 1939064 1732397 1525731 1947064 1740397 1533731 1327064 Total 1148627.111 1349516 1550404.889 1751293.778 1952182.667 Total + Best 3,875,246.67 3,682,357.78 3,676,580.00 3,489,468.89 3,483,691.11 3,477,913.33 3,296,580.00 3,290,802.22 3,285,024.44 3,279,246.67 3,279,246.67 3,477,913.33 Best 1,148,627.11 1,349,516.00 1,550,404.89 1,751,293.78 1,952,182.67 Best 3,875,246.67 3,682,357.78

viii

4 5 5 5 Stage 6 i 5 Stage 5 5 Stage 4 5 4 Stage 3 5 4 4 Stage 2 5 4 4 Stage 1 5

7.96 8.96 7.96 6.96

200,000.00 200,000.00 200,000.00 200,000.00

1592000 1792000 1592000 1392000

8000 8000 8000 8000

32000 40000 40000 40000

51900 51900 51900 51900

1675900 1883900 1683900 1483900

5,551,146.67 5,361,813.33 5,366,257.78 5,359,146.67 5,359,146.67

X 8.27

cost 220,000.00

Cost(x) PrC 1819400

inventory cost 8000

Cost(i) IC 40000

SeC 51900

Total 1911300

Total + Best 7,270,446.67

Best 7,270,446.67

9.73

200,000.00

1946000

8000

40000

51900

2037900

9,308,346.67

9,308,346.67

9.91 10.91

179,342.47 179,342.47

1777283.84 1956626.30

8000 8000

40000 32000

51900 51900

1869184 2040526

11,177,530.50 11,348,872.97

11,177,530.50 11,348,872.97

10.22 11.22 10.22

175,000.00 175,000.00 175,000.00

1788500 1963500 1788500

8000 8000 8000

40000 32000 32000

51900 51900 51900

1880400 2047400 1872400

13,057,930.50 13,396,272.97 13,049,930.50

13,057,930.50 13,049,930.50

10.37 11.37 10.37

175,000.00 175,000.00 175,000.00

1814750 1989750 1814750

8000 8000 8000

40000 32000 32000

51900 51900 51900

1906650 2073650 1898650

14,964,580.50 15,123,580.50 14,956,580.50

14,964,580.50 14,956,580.50

9.96

185,000.00

1842600

8000

40000

51900

1934500

16,899,080.50

16,899,080.50